Banque Cantonale de Genève v Sanomi

Posted on 16/07/2017 · Posted in Financial Litigation, Investment

When a promissory note is not executed as a deed, can the claimant bank rely on forbearance as adequate consideration? In a recent judgment in Banque Cantonale de Genève v Sanomi, the High Court answered the question in the affirmative and reiterated the underlying principles of the enforceability of promissory notes.

In this case, after Defendant Mr. Sanomi’s oil and gas trading company, Taleveras, suffered significant business losses, he agreed to sign two promissory notes as a way of personal guarantee for the outstanding loans to the Claimant, Banque Cantonale de Genève. However, when the bank sought to enforce the promissory notes, Mr. Sanomi resisted their application for summary judgment arguing that-

  1. despite the terminology, the notes were not in fact promissory notes;
  2. prior to his signing, he was specifically assured that the bank would make no demand under the promissory notes; and
  3. without any consideration on the part of the bank, the notes were not legally enforceable.

A promise made is a debt unpaid”
Robert W. Service

Pointing out the definition in Section 83 of the Bills of Exchange Act 1882, Mr Justice Blair held that the notes in question were indeed promissory notes and need not be negotiable in order to be legally valid. He further confirmed that under English law, a bill of exchange or promissory note is to be treated as cash and the holder is fully entitled to summary judgment on the instrument. The fact that here the notes were more likely to be cancelled on full payment of the outstanding loans rather than transferred to a third party did not affect their legal status either.

As for Mr. Sanomi’s “no demand” defence, the Court found all evidences pointed towards the contrary and there was nothing on record that suggested that the notes were anything other than security which the bank could rely on if required.

Finally the Court proceeded to explain how, since the notes had not been executed as deeds, they required to be supported by valid consideration for the Claimant to enforce it against the Defendant. So the ultimate question was whether the forbearance was given in exchange for the promissory notes, or whether the bank would have sought to enforce the notes irrespective of any consideration. Following legal precedents starting as early as 1864 (Alliance Bank Ltd v Broom), the Court agreed that forbearance was indeed a valid consideration, and there had been both promised and actual forbearance in the current scenario. The Claimant was thus held to be fully entitled to summary judgment on the promissory notes.

Link: Banque Cantonale de Genève v Sanomi EWHC [2016] 3353

Expert Evidence Limited prides itself on assisting throughout the legal process where required and is a professional firm concentrating on the four main areas of dispute resolution; acting as expert witnesses in financial litigation, mediation, arbitration and adjudication. The firm has a civil, criminal and international practice and has advised in many recent cases. Areas of specialisation include banking, lending, regulation, investment, and tax.

Ask a question about \Expert Witness services. We are here to help!

Contact Us Now

Disclaimer: The above case summary is derived from publicly available information and is not intended to be anything more than a statement of the author’s views on the salient factors of the case. It is not intended and should not be understood to be legal advice of any sort. All views are solely those of the author and no use of the summary should be made without statements being checked against the source of information. Expert Evidence Limited takes no responsibility for the views expressed. The copyright of the summary is owned by Expert Evidence Limited but may be used with written permission which may be forthcoming on application through the contact us page. This news item is not intended to imply or suggest that Expert Evidence Limited was involved in the case, only that it is considered an interesting legal development.